Succeeding in the ASC

Massive increases in surgical volume will demand more efficient procedures in outpatient centers. Here's what to consider.

By Steve Sheppard

As you prepare for the future, do so with the changing role of the ambulatory surgery center (ASC) in mind. Having helped develop more than 40 centers during the past few years, I have seen them assume a central role in the changing healthcare environment.

These facilities help you increase surgical volume while paying dividends to your bottom line. But you will need to discern good opportunities from possible missteps to succeed in this dynamic arena, especially as unprecedented numbers of new patients flood the healthcare system while the number of eye surgeons remains flat and reimbursements continue to fall. Consider these important points.

New technology in ASCs

Generally, new technology will improve outcomes, make surgery safer and speed up procedures. But not all devices are suitable when they are introduced. For example, minimally invasive trabeculotomy with the Trabectome system is an extremely effective method of improving fluid drainage for glaucoma patients, and the procedure is best performed in an outpatient setting. However, it's currently a break-even or marginally profitable procedure at best in the ASC. The CPT code pays $790, but the equipment costs $40,000 and the disposables for each case total $500. The reimbursement for the procedure is sufficiently higher in the hospital setting.

Eventually, costs for disposable materials will decrease, making the procedure more affordable, but only when the manufacturer can reach a critical volume that allows it to secure better deals from its suppliers and pass on those lower costs to you and the ASC.

The good news, however, is that the ASC will become the preferred setting for most ophthalmic procedures as time passes. There will be no other choice. Between 2003 and 2020, ophthalmic surgeries are projected to increase by 47% — 55% of those surgeries will be cataract extractions.¹

The federal government will continue to regulate healthcare tightly, but it can't interfere with access to care that increasing numbers of patients will need. Right now, we have 5,300 ASCs in the United States, slightly fewer than the number of hospitals. This is where you will be needed most, performing more cases per hour under a system that will increasingly reward more efficient surgeons. But the reimbursement pie will continue to shrink, forcing you and others who partner in an ASC enterprise to do everything more cost-effectively. I can't emphasis that point enough.

Ambulatory surgery centers won't be able to absorb downtime associated with empty ORs in the future. One- and two-room OR centers, single-specialty in focus, may compete best.

ASC Economics 101

About 90% of the surgical volume of the ASCs that my company builds or manages is delivered by owner physicians, including those who affiliate by performing procedures before buying in. The dollars and cents of ASCs will weigh even more in your favor when the aging of the patient population turns epidemic.

So what should you consider before investing in an ASC? First, understand that the fair market purchase price will be based on a facility's earnings before interest, taxes, depreciation and amortization — or the so-called EBITDA.

This amount will vary, depending on the center, local market conditions and the art and science of deal making. But generally the price of a share will be based on 3.0 to 4.0 times the EBITDA. For example, if the EBITDA is $1 million, the range of value for the center will be $3 to $4 million — or $30,000 to $40,000 per share.

If you pay a multiple of four, you pay $4 for every $1 of EBITDA, a return of 25% on your investment. A multiple of three translates to about 33% on rate of return, a great investment when money market accounts are earning less than 1%. If you're thinking of going the ASC route — and there is no reason not to at this point — take a long, hard look at these numbers.

Also, consider single-specialty centers, which are associated with a higher profit margin than multispecialty ASCs. Singlespecialty centers require less equipment and fewer supplies. You also are able to leverage the value of a team's expertise in one area, benefiting from maximal efficiencies and competence.

Decreasing reimbursements will squeeze large, multispecialty centers that have 10 to 12 operating rooms more than an efficient, one- or two-room eye center, which can operate more nimbly and efficiently.

Will Your ASC Hold Up? By Margaret G. Acker, RN, MSN, CASC Whether you're shopping for shares of an ASC or hoping to maximize the value of the shares you own, keep these goals in mind. • Make sure the equipment is state of the art. ASCs that perform more and different procedures will be vital. We have implemented a full retina program and are trialing endoscopic cyclophotocoagulation (ECP). • Assess the EMR status. Our system, installed 16 months ago, caused great frustration initially. But now we run more efficiently than ever, tracking inventory and eliminating a plethora of paperwork. Do you want to be in an ASC before or after installation? How will that affect your negotiating position? • Find out if the surgeons use the same supplies and equipment. Use of separate instruments and supplies is a sign of trouble. It can only mean one thing: Costs will continue to increase while reimbursements decrease. • Assess the case mix. Long and expensive surgery hurts everyone and has no place in the ASC. Make sure special exceptions aren't keeping your facility from being special. • Look at utilization. Utilization is very important and reflects how well the ASC meets the needs of patients and surgeons. Our ASC is utilized by 100% of the ophthalmologists in our city and several from outlying areas. • Make sure retina is involved. The codes for retina pay more each year. Find out if retinal surgeons are 100% committed to operating in your facility. Volume determines success. • Consider critical cost factors. Besides supplies and capital equipment, staffing needs to be carefully matched to census. Refurbishing single-use items through FDA-approved facilities also saves. We do phaco tips and some probes, as well as any pack that is open and not used. We also shop our insurances and group purchasing each year, leading to additional savings. • Make sure the facility is accredited. Accreditation is fast becoming the industry standard. It confirms your competence and credibility and keeps your practice current and safe.     Margaret G. Acker, RN, MSN, CASC, is chief executive officer of Blake Woods Medical Park, Jackson. Mich., a multispecialty facility for ophthalmology, retina, orthopedics and general surgery.

At last: E-medicine that works

One last consideration: The future of electronic medical records (EMRs) has arrived. During the past year, we have seen the software and hardware begin providing practical and feasible solutions. We recently installed a system in the center of our largest client and it's working out very well. We trained the staff from Tuesday through Thursday, converted to the new system on a Friday, and never looked back. As a result, two staff members work on collections instead of keying in data. The increase in collections, up by more than $10,000 a month, will pay for the system in 12 months.

Improvements in technology associated with secure wireless networking, higher processing speed, low cost for gigabytes of storage and increased storage capacity have made EMR success possible in the ASC. The EMR system liberates surgeons, anesthesiologists, nurses, and staff from paper, pad and hard-wired desktops. Everything is done on notebook tablets, free of the burden of needless infrastructure.

With all of these factors considered, you'll find the ASC is a good place to perform surgery during the next 5 to 10 years. OM

Reference

1. Etzioni DA, Liu JH, Maggard MA, Ko CY. The aging population and its impact on the surgery workforce. Ann Surg. 2003;238:170-177.

Stephen Sheppard, managing principal with Medical Consulting Group LLC, Springfield, Mo, works primarily with physicians in spearheading Medical Consulting Group's development of ASCs throughout the country.